Vietnam’s emerging hospitality hotspots

Vietnam continues to present plenty of golden opportunities for hospitality investors. In 2017, international arrivals grew by 31%, according to STR’s area director Asia Pacific, Jesper Palmqvist at the Hotel Investment Conference Asia Pacific (HICAP) Update held March 27 to 28 in Singapore.

As of February 2018, rooms under contract pipeline increased by 40%. “The gap between demand growth and supply growth has never been higher – so for now it’s all systems go,” said Palmqvist.

Peter R. Ryder, chief executive officer of Indochina Capital who moderated the Vietnam breakout session, concurred, saying, “Within 30 years, Vietnam will be one of the top 20 largest economies in the world. There is massive amounts of foreign direct investments (FDI) being poured into the country, while domestic consumption is also booming.”

Emerging jewelsWhile developments have been largely focused in Ho Chi Minh, Hanoi, Danang and Nha Trang, industry trailblazers are already setting their sights on other cities with budding potential.

According to Dynasty Investment Corp’s managing partner Olivier Dung Do Ngoc, who has been based in Vietnam for 11 years, small beach town Ho Tram is the one to watch, thanks to its proximity to Ho Chi Minh. In a show of confidence, the group partnered Club Med to invest US$70 million in the area and the country’s first Club Med resort, scheduled to open in 2021.

Ho Tram is also home to a casino stretch, Kahuna Ho Tram Strip, which features condotels, villas, an 18-hole golf course and a casino resort. While the casino is currently allowed to serve only foreign players, this could soon change. A pilot programme kicked off last December that now allows citizens over 21 years old and with a monthly income of at least VND10 million (US$440) to enter selected local casinos and gamble.

Do Ngoc also highlighted the potential of Quy Nhon, which is currently seeing a new airport under construction, although he believes direct flights are required to truly “accelerate growth as in the case of Danang”. Also faced with a similar airlift issue is Con Dao Islands, which he “still [thinks] is a jewel”.

For veteran Vietnamese hotelier Le Hoang Vu, consultant – development, Vietnam for InterContinental Hotels Group, he is placing his money on Halong and the nearby Van Don in Quang Ninh province. “I think in the next three to five years, these new destinations can be like a Danang or Phu Quoc. In Van Don, which has been designated the second special economic zone (SEZ) after Phu Quoc, they are building a new international airport and a casino, etc. It’s all very exciting,” he said.

Other areas highlighted include Sapa, which Le believes is “a nice tourist destination for both international and domestic markets”, as well as industrial parks in key cities which have plenty of growth potential due to the high frequency of guest visits and large number of tenants from international companies.

Potential challenges Infrastructure development is one major area which needs to be managed properly to lure more foreign investors, cautioned Le, although the country currently leads infrastructure spending in the region.

According to the Asian Development Bank, Vietnam’s public and private sector infrastructure investment averaged 5.7% of gross domestic product in recent years, the highest in South-east Asia. In comparison, Indonesia and the Philippines spend under 3%, while Malaysia and Thailand spend even less at under 2% respectively.

The bulk of spending goes toward the building of urban railway lines in Ho Chi Minh and Hanoi; making up the remaining are projects such as the Hanoi-Hai Phong Expressway, Van Don International Airport, National Road 4B, the Eastern Economic Corridor and the tollway connecting Ho Chi Minh and Phnom Penh, Cambodia.

A chief obstacle, however, that concerns many industry experts and market analysts is the overdependence of FDI on the ups and downs of the global economy. In other words, this FDI inflow could be affected by instability that stems from geopolitical disputes between global powers.

“[In the context of Trump], we don’t know when this trade war will end and how it’ll unravel and hit South-east Asia and Vietnam, which is still vulnerable to exogenous shocks,” opined Dynasty’s Do Ngoc.

Yet even as Vietnam continues to accelerate its growth, the sustainability of tourism development must not be overlooked.

Said Do Ngoc, “This is especially amplified on the beachfront [destinations] where there is scarcity of power and water, and people are throwing all sorts of rubbish into the ocean. It’s not a luxury any more and not something we do for CSR – developers, architects, local people and authorities need to work together to conserve the environment.”